Question 1

A corporation must have at least 35 shareholders.

Accepted Answer

A) True 
 B)False

Question 2

The major difficulty in most insider-trading cases has been

Accepted Answer

A)   that lenient judges have simply released the guilty individuals.
B)   that insider trading, even though illegal, actually serves a beneficial economic and financial purpose.
C)   that inside trades have not been legally well defined.
D)   inside trades actually have a beneficial effect on the wealth of all shareholders.

Question 3

List the 4 components of good corporate governance and identify additional measures that could be added to strengthen corporate governance.

Accepted Answer

Good corporate governance results from:
...

Question 4

The Internet is largely responsible for the internationalization of the financial markets.

Accepted Answer

A) True 
 B)False

Question 5

Future financial managers will need to understand

Accepted Answer

A)   international cash flows.
B)   computerized funds transfers.
C)   international currency hedging strategies.
D)   all of the other answers are correct

Question 6

The financial markets value assets based on the most productive current use.

Accepted Answer

A) True 
 B)False

Question 7

The largest financial intermediaries after the banks are insurance companies.

Accepted Answer

A) True 
 B)False

Question 8

One advantage of the corporate form of organization is that income received by shareholders is not taxable since the corporation already paid taxes on the income distributed.

Accepted Answer

A) True 
 B)False

Question 9

Dividends paid to corporate shareholders have already been taxed once as corporate income.

Accepted Answer

A) True 
 B)False

Question 10

Companies that have higher risk than a competitor in the same industry will generally have

Accepted Answer

A)   to pay a higher interest rate than its competitors.
B)   a lower relative stock price than its competitors.
C)   a higher cost of funds than its competitors.
D)   all of the other answers are correct

Question 11

Institutional investors have had increasing influence over corporations with their ability to vote large blocks of stock and replace poor performing boards of directors.

Accepted Answer

A) True 
 B)False

Question 12

Social responsibility and profit maximization are synonymous.

Accepted Answer

A) True 
 B)False

Question 13

Corporate restructuring in the late 1990s more often took the form of

Accepted Answer

A)   leveraged buyouts.
B)   mergers to refocus on core businesses.
C)   a change in capital structure.
D)   none of the other answers are correct

Question 14

Corporations can reduce portfolio risk by

Accepted Answer

A)   narrowing their focus on one successful product.
B)   merging with companies in unrelated industries.
C)   repurchasing their own stock.
D)   all of the other answers are correct

Question 15

In the mid 1950s, finance began to change to a more analytical, decision oriented approach.

Accepted Answer

A) True 
 B)False

Question 16

The internationalization of the financial markets has

Accepted Answer

A)   allowed firms such as Nortel to raise capital around the world.
B)   raised the cost of capital.
C)   forced companies to value everything in U.S. dollars.
D)   all of the other answers are correct

Question 17

Insider trading involves the use of information not available to the general public to make profits from trading in a company's shares.

Accepted Answer

A) True 
 B)False

Question 18

Selecting profit maximization as the primary goal of the firm may not increase its value, because a profit-only focus has several drawbacks. List and describe these drawbacks.

Accepted Answer

1. <b>Risk may increase as profit change...

Question 19

The first Nobel Prizes given to finance professors was for their contributions to capital structure theory and portfolio theories of risk and return.

Accepted Answer

A) True 
 B)False

Question 20

Inflation

Accepted Answer

A)   increases corporations' reliance on debt for capital expansion needs.
B)   creates larger asset values on the firm's historical balance sheet.
C)   makes it cheaper (in terms of interest costs)  for firms to borrow money.
D)   all of the other answers are correct

Exam 1: The Goals and Activities of Financial Management

The first Nobel Prizes given to finance professors was for their contributions to capital structure theory and portfolio theories of risk and return.

Correct AnswerverifiedShow Answer

The largest financial intermediaries after the banks are insurance companies.

Correct AnswerverifiedShow Answer

One advantage of the corporate form of organization is that income received by shareholders is not taxable since the corporation already paid taxes on the income distributed.

Correct AnswerverifiedShow Answer

In the mid 1950s, finance began to change to a more analytical, decision oriented approach.

Correct AnswerverifiedShow Answer

Institutional investors have had increasing influence over corporations with their ability to vote large blocks of stock and replace poor performing boards of directors.

Correct AnswerverifiedShow Answer

A corporation must have at least 35 shareholders.

Correct AnswerverifiedShow Answer

Future financial managers will need to understand

Correct AnswerverifiedShow Answer

Dividends paid to corporate shareholders have already been taxed once as corporate income.

Correct AnswerverifiedShow Answer

Corporations can reduce portfolio risk by

Correct AnswerverifiedShow Answer

The internationalization of the financial markets has

Correct AnswerverifiedShow Answer

Corporate restructuring in the late 1990s more often took the form of

Correct AnswerverifiedShow Answer

Selecting profit maximization as the primary goal of the firm may not increase its value, because a profit-only focus has several drawbacks. List and describe these drawbacks.

Correct Answerverified1. Risk may increase as profit change...View AnswerShow Answer

Companies that have higher risk than a competitor in the same industry will generally have

Correct AnswerverifiedShow Answer

Insider trading involves the use of information not available to the general public to make profits from trading in a company's shares.

Correct AnswerverifiedShow Answer

Social responsibility and profit maximization are synonymous.

Correct AnswerverifiedShow Answer

Inflation

Correct AnswerverifiedShow Answer

The financial markets value assets based on the most productive current use.

Correct AnswerverifiedShow Answer

List the 4 components of good corporate governance and identify additional measures that could be added to strengthen corporate governance.

Correct AnswerverifiedGood corporate governance results from:...View AnswerShow Answer

The Internet is largely responsible for the internationalization of the financial markets.

Correct AnswerverifiedShow Answer

The major difficulty in most insider-trading cases has been

Correct AnswerverifiedShow Answer

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1. Risk may increase as profit change...
View Answer

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Good corporate governance results from:
...
View Answer

Correct Answer
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